The new leg of demand, first time home buyers.
Chicago, IL (PRWEB) November 27, 2013
As the housing market continues to stride toward its pre-recession levels in home prices and sales, recent September reports revealed that the fast-paced momentum of the summer has slowed coming into the fall season. The Federal Savings Bank discusses the implications of a slower growing real estate market, and how it's constructive.
According to the latest S&P/Case-Shiller Home Price Index, home prices increased in the third quarter of 2013 and have steadily risen over the last year.
The report revealed home prices were up 3.2 percent in the third quarter and 11.2 percent compared to a year ago. The 10- and 20-City Composites grew 0.7 percent in the third quarter, but were reportedly up 13.3 percent from a year ago. Of the 20 cities measured in the index, 13 reported year-over-year growth rate increases. However, September appeared to be slower than other months, as 19 of the cities reported lower monthly returns. As seasonal selling comes to an end, the slowdown is not altogether a surprise.
"The second and third quarters of 2013 were very good for home prices," said Index Chairman David Blitzer. "The National Index is up 11.2 percent year-over-year, the strongest figure since the boom peaked in 2006. The 10-City and 20-City Composites year-over-year growth at 13.3 percent was their highest annual numbers since February 2006."
Rising home prices are a good sign for the housing market, which saw values plummet during the recession. Blitzer noted that the improvement is a balancing act between increasing home prices and sales. According to the index, home prices have returned to their 2004 levels, while home ownership has not.
"Rising prices have been great for getting many homes out from underwater, however, current lien holders need to get those properties sold which will rest on the shoulders of the new leg of demand, first time home buyers" says Nick, a banker, at The Federal Savings Bank. He continues "We need to get more first time home buyers prepared to enter a real estate market with tight supply issues and rising prices."
David Blitzer voices a similar concern over who will take over future demand, "The longer run question is whether household formation continues to recover and if home ownership will return to the peak levels seen in 2004."
The western states had the largest increases in home prices during the third quarter, prompting the debate of another housing bubble popping up. Fortunately, the slowdown in September could suggest that steadier and more sustainable growth will come over the next few months. In addition, home construction and sales are lower than their booming peak levels before the recession.
For borrowers, the index findings indicate that the housing market might be strong enough for mortgage rates to rise slightly. As the Federal Reserve has been artificially keeping rates low in an effort to stimulate the economy, its spending is expected to end when the market is strong enough to continue growing on its own. The price slowdown in September revealed the housing market is moving toward sustainable growth and healthier pace of recovery.
Contact the Federal Savings Bank, a veteran-owned bank, to discuss affordable housing options and first-time home buyer programs.